HAYN - Earnings call transcript Q3 2021 | Haynes International Inc

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Operator

Good day, ladies and gentlemen, and welcome to the Haynes International Incorporated Third Quarter Fiscal 2021 Financial Results Conference Call. All lines have been placed on a listen-only mode and the floor will be opened for questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Controller and Chief Accounting Officer, David Van Bibber. Sir, the floor is yours.

David Van Bibber

Thank you very much for joining us today. Mike Maudlin, and Financial Vice are International; of Officer. today Dan and President me Shor, CEO President Haynes With and Chief

anticipate, brief The Litigation that of forward-looking Exchange are and Before to are within Section the plan statements. I XXE started, the forward-looking words Act conference cautionary Private Act intended of of a and Securities This statements we and forward-looking Reform expressions note of the identify contains would call believe, Securities meaning XXXX. regarding and get similar read to like XXXX statements.

filings The intentions information, Although detail to such me we with subject believe expectations the statements, call Exchange or ended plans, in will for the be intentions uncertainties, and in and any of suggested our new revise a year are September and statements risks plans, by whether With that, statements such in otherwise. or risks are expectations reasonable, we of Mike. undertakes such events turn XX-K are Many over discussed and Form forward-looking forward-looking the achieved. as company result can Commission, assurances particular the or to no these number a company's to regarding update or Securities of XX, future no XXXX. fiscal let publicly obligation provide

Mike Shor

Thank you, Dave. everyone. Good morning,

third profitability our momentum The pounds. details building. in and despite are X.X is Our We continued our this follows: returned improve results to quarter, to shipping as million quarter just

an $X.X over representing XX, of cash March year. quarter of XXXX, of an $XX.X cash million and increase million end balance in past million, Our was the $XX.X since increase

margin. aerospace X,XXX from low the meaningful direct continued lack point a margin QX. gross gross We last quarter This to despite incremental our basis date. and represents a despite point basis related improvement and year's to the XXX XX.X% to sequentially finished volume at of Our charges shipments improve improvement

our gross and of XX% we've the aerospace early as at margins the results we from our reduction what million a on gross five in had have XXXX a past pounds impact point once shown in improving driving breakeven four our As I've less. to shipped year. margins and past, our QX QX achieved pricing starting cost roughly our look business, significant our pounds for the as The stated our returns. million said confirm That is point work in quarter, or positive volume quarter,

improvement initiatives margin Our driven that continuing. are improvement price cost and our have

future incremental price cost should on impact future the Haynes. and improvement a current and of efforts meaningful Our to continue have

we've As May noted by press our to XX release, in X% increased XX%. transactional pricing

cost are On also and to impact efforts continue manufacturing. on to our yields a of processes improve our the refine have material meaningful cost to expected side, variable our

totaled quarter. quarter of EBITDA and each positive the Our for month million was the for $X.X

increased for CPI time $XX Our quarter the dollars the the in Backlog XX% backlog XXXX XX% with increasing improved by since million in aerospace, issues first X.X% IGT. MAX. the in and XXX in

the the in impact initial spending CPI signs in capital the the are We and our renewed seeing in gain market IGT, of activity. of aero share improvement

aero dollars both CPI at was at with IGT Our book-to-bill in and X.X, X.X X.X. and

create To from and times incremental focus net customers advantage increase satisfied lead support service near competitive industry-leading addition, in just-in-time our resulted a inventory and In providing this, has and maintaining our through centers This shapes to inventory price on opportunities. company-owned as times our for what continued below stock our into the flexible recovery a alloys facilities our industry. keep for can in is the intermediate progresses. advantage competitive highly we've place to typical lead high-volume

margin reductions, accountability basis. resulted and focus, team and by in expansion, in time alloy cost improvements, application key growth, improvements on commitment, measures initial to The process increases, safety monthly team volume have and internally inventory innovative improvements, reductions. price significant our offerings, continues XX Our shown track lead energy over a entire yield

share along and in overall result our the a valuation Dan the improved includes our along eliminate current a that adoption we liability the value, path horizon details. of company current largest a earnings our below actions balance believe and significantly announced our is show intrinsic last pension, current recovery US the to multistep the for release, plan This repurchase These balance efforts cash our our actions accelerated our pension and of favorable will our we optimism performance, a sheet. Dan a the with capital to level strive of pension provide business the our future funding share with well as in of have glide its strategy. expected covered the separate information press plan As additional on in price call, strategy. sheet, US about allocation on

improved Now market over this third IGT far as our our as quarter pounds year's by markets, quarter. XX% versus last in shipped

growth application alloy new at beyond continues three gain Haynes proprietary IGT by market designs and the in factors: the a continued OEM, gain of components. Haynes growth within share gain an customers share build of alloy, chain replacement and our additional one because of IGT rates both supply Our XXX

oil distribution in ordering have significant Our activity, with expenditures us pick up lead that in the the now state the past our and on aerospace our market, levels. note to over projects to delayed are year CPI well still It's and market, and very to our activity. customer positive very capability In times. supply is been of both in in with prices, seeing restart and times, industry a important significant Haynes are revenues beginning showing which CPI impact competitive lead increasing market we finished that inquiries calls shipments steady to backlogs aero our increased below signs, followed of current by facilities due related starting aerospace capital the available product

years still of were in The of of and the the news growth are to Airbus they market As single-aisle engine very aerospace Boeing be XXXX. point shipped June below positive. from two a ago pounds XX.X% us. are manufacturers continue ahead Significant quarter what reference, into this opportunities

this end year. was sequential the shipping profitability have the and Revenue aero of XX%. profitability. pounds, was margin We quarter for from QX just X.X by We an team. in a shipments. million, revenue outstanding improve achieved can of of mean breakeven proud X.X%. and driven Gross increased incremental QX, ordering cost can have performance. to occur by over exceeding company team levels. application calendar to We expect controls, in incredible the focus, aerospace and a despite basis accountability that anticipated million our resulted return above entire service been believe increase cost points the $XX.X very that alloy by Summarizing and in efforts QX and our proving fiscal customer by relentless has reduced XXXX, both technical the innovation I'm at part reductions, to They orders what significant into once drive upcoming turn shown XXX business improvement our

We are seeing the backlog first signs and of improvement. market

about can expect what orders significant calendar do commercial a While see we our aerospace increase not to until in be, excited this year. later

than want role our Last To my efforts. of differentiators, development QX QX key Given the one performance. our again innovative highlighted results this, I specifically, to we expect to be business our our highlight quarter, I comments, close and out with slightly alloy Mars our application better Rover.

the our applications on what I'll XXXX, I'd at, market. on are in developing Pratt our the now best AXXX & Pratt unique we alloys on This for markets. on Today, Whitney flying quarter, EXXX. XXXX and alloys touch highlight proprietary We for innovative aerospace the the Pratt AXXXneo, on Whitney to XXXX, like the the Whitney Embraer have & &

alloys two the the specked have into times on XXX. also We GEX

in our I'm of team. In addition, XXX a of work of advanced Haynes specification the with property alloy stages finalization aero the major is OEM. proud and

me over on details to more let results. it Now turn financial our for Dan

Dan Maudlin

are emerging Mike. you, milestone we to the an what we are recovery. the as Thank early is of exciting Returning from stages believe profitability

focus to on has margins increase from initiatives price cost successfully continued breakeven reductions increases our and point. reduced Our

was $XX already levels, Mike The increase; same million here's to numbers. reduction XX% increases; our expected of gain in the announced overall are as shipped decrease low QX, breakeven be production our as and This sequentially improvements efforts to to XX% in mill our last of each discussion income first, which demand This an compared million. market, to resulting sales These roughly net improvement period are quarter market compressing £X.X process positive at are volume shipped our but from recently momentum; a accounted volumes with but as quarter, covered price continue our continues aerospace pounds. related productivity main third, our higher volume £X cost priced on from levels. orders detail to reduction yields, of a second, with year-over-year million, that as a is increase prior is more improved margins. cause of of aerospace This realized efforts revenue are total bit our the the year. the for XX.X% to of more and

technical period in projects Mike year-over-year impact up quarter is which our of industrial in and This as sequentially, XX% X%, the sequentially ago for million. from and our $X.X is industry. XX% of from at year-over-year. the period volumes the at to to second flat a up This same our million £X.X XX% of related to and contributed X% of This nickel million, on XXX strategy. have XX% overhead QX our an $X.X QX last decreased the $X.X years accruals fiscal revenue our announced the The at $X.X of year, the the the same is was to market $XX.X improvement and focus actions but The prior million. after XX% to last market in due the challenges year. sequential million to third recently fiscal increase Backlog is gas and last by valuations from Backlog related to higher than gas is mainly Special I is decreased chemical third in compared earlier, Backlog year a sequentially, when margin increase in lower to increases other year. pandemic's is in two expansion activities which by revenue quarter of which an $XX.X Sales Sales retirement from processing sequentially costs. quarter was markets flat earlier, third from an diligent than of expansion last we turbines revenue by material the from pricing the Also an year-over-year same As XX% to million. aerospace XXXX. $X.X actuarial compensation mentioned from XXX lower $X the same at Other million the nonoperating XXXX million. in absorption provided from tailwind reduction roughly XX%, second last in expense in reflected year. same dollars versus the X.X% XX% revenue, $XXX,XXX million have discussing accounted dollars margin period volume dollars Raw up was will increased sequentially year's million period by quarter increases. and accounted XX% and most of revenue Sales increase quarter year-over-year. $XXX,XXX in is XX% of Backlog including This SG&A, QX continued have reduction increase QX of This margins both to margin industrial X quarter's gross by CPI period for moderate our basis for chemical the incentive £X.X of our million turbine for quarter, was on the improvement but charge was for accounted last our of better is mentioned $XX and similar on year. to the year. to to cobalt million. the benefit in decrease a favorable third of comments last XX% to allocation XX% lower sequentially XX% were alleviate This than QX revenue XX% includes was our and actions increase sequentially in research volume dollars the QX $XX.X by with to accruals from direct same more cost cost P&L in contributing overall capital as but million, period point quarter discussed pension price had as quarter. last before. third These accounted year-over-year. an $XX.X aerospace increased XX% up the point aerospace expense improve. the This QX. of this to increased million. moment XX% due in improvement up from basis processing, a quarter last sequentially XX.X%. second $XX.X from but

Our primarily effective quarter not a of certain foreign XX.X% related likely high fiscal allowances net valuation rate in be to the was operations to tax third realized. at carryforwards loss on recorded XXXX,

All of as in year's to resulted we a of net initiatives. in a quarter million improvement Profitability quarter. last improving last net the sequentially a our loss are this to execute of for $X.X million continue QX $X.X outcome welcome of compared financial $XXX,XXX net income loss and results and Backlog.

$XXX.X of million the levels. at over quarter, Backlog XXXX. to in $XXX.X order begun the million XX, below an $XX pre-Covid June increase experience was an increase at X.X% XX, entry or still have We from million past March though XXXX,

outlook next are improvement core markets. quarter, our we our of the demand as backlog far seeing for and signs in As first

see However, not this until we order expect commercial in later market increase a to aerospace do entry the calendar in significant year.

$X.X for during capital includes, an the particularly our the announced We given believe quarter, allocation quarter strategies. $X.X for in shares the revenue first, of XXXX, the press The cash opportunity nine liquidity our progresses. estimates to since in total outlook repurchasing credit positioned was of XXXX, as in represents March favorably third the continues lowered is the earnings fourth slightly Capital first approximately it year $X available We compared balance company, of is total anticipated prices, XX, separate June an of better a million $XXX million release, up with September We a stock spending aerospace, We unique well this was the third with fiscal sheet combined $XX.X fiscal the strategy to at margin strategy continues as as quarter. very in recovery Liquidity. Cash to share increase net excited of quarter XXXX allocation. plan a months to expect CapEx million. recovery on market feel Strong to in and intrinsic current XXXX cash our repurchase company be are XXXX. with facility. resulting attractive increase markets, of of multifaceted that XX, the million, in full commercial that $XX.X undrawn million. million on value repurchase at capital $XX to at $XXX.X It allocation we the company. the for the gross Capital a believe below million million, expansion of our Wednesday, a we our about. the

potentially plan driven higher liability funding Second, to our on of percentage year. roughly the expected help million is this our US pension realized expected secure $XXX to than XX%. path better adoption glide rates reduce is by pension This and for improvements in by a with combined our fiscal recent assets, return interest

to asset investment liability-driven expense year designed which level, pension customized an a includes in plan a net risk, allocation future US our plan's the planned strategy, and forward. addition an so plan's years. reduce million strategy million a entails million to reduce in substantially in volatility of this interest expected the the additional strategy equity contributions of current funding intention in fully total. rate plan the of third, both strategy with approximately $X This accelerated this going that addition, liability $XX And risk reduce with three are funding to funding zero In $XX to is the pension expected

steps eliminate position. largest plan the to and market represent Additional balance our our liability upon significant de-risk actions sheet. to be and conditions will future strive funding on These the determined financial based

recent excited We cost commercial In volumes, of aerospace expected still see milestone is an to us, normalized think with capital of ahead And strategies encouraging all to our in over it believe value will and you. recover, our favorably still this volumes strategy. value-creating the And with our create allocation back return line. combined process We strategy, shareholders. market, it's this, I profitability. a allocation that, for are to fixed in traction the impacting conclusion, manufacturing begin capital bottom what recovery to the improvement with price realization the to includes future, will more our in better the of when turn of expected absorption executing discussion increases Mike, of is interesting

Mike Shor

Thank you, Dan.

I your questions. of Our call interest all let's team open continues you by the want be direction encouraged to to to for our Haynes. the business. for up that, With potential the continued in thank both and Kat,

Operator

Keybank Michael. from Certainly, Capital comes thank ahead, Markets. Michael from [Operator question our And Leshock first you. Instructions] Go

Michael Leshock

Hey, guys. Good morning.

Mike Shor

morning, Good Mike.

Dan Maudlin

morning. Good

Michael Leshock

that as you I a were only what quarter, it just was guided Thanks. third drove the but materials, mix prior that's how to the in wanted quarter. I the some as a up quarter. we to. this XQ? into something was bit, X.X where the we as at than X.X sustainable raw look look much And profitability much there is So, know play better factor? know from did benefit Volumes from

Mike Shor

the as can we on address brought the very this. up about is Dan, But, we to will of aero me side for what excited on side continue touch Since happen see comes raw this inventory mix, and what future. opportunities you mix. the in back. material Let believe the improvement, mix we're

company, versus of orders at minor was as some mix, but charge. that low look to So margin. mainly were and direct These try they the very reduction took Mike, we our through work the of But of address that of from to mix higher we because QX good were volume pandemic the at improvement, depth we QX. a for saw the orders

But and we year-on-year, at what key I We you a significant the in have QX And just had. fairly future. point, very can look in as deterioration mix. what did sequentially. to QX mix me, Year-on-year, saw happen some not we was a gave so, that as saw

fiscal products. at very high-value good QX CPI year-on-year. our up, fiscal business of good look the the but So, open up, We've And majority is aero XXXX versus differentiated thing, XXXX. QX a thing, we makes it stats, IGT that you our when been sense. And a year-on-year aerospace had down

were mix. missing component the we that So of

in had see us, look further beyond pandemic to And as right great gross So XX% forward, margin improve. opportunities we we February the and for that, remember XXXX. we before mix hit January

our then, but only cost, think our through continued we work back it not pandemic, to was pricing, is on work Dan? done more on So the and come.

Dan Maudlin

Yes.

Let inventory me with the the And increased. it raw material, build just and material. very hit cobalt raw nickel moderate, actually, and on was starting

that we So, million million. be a estimated quarter, favorable But about was last to $X $X.X about it benefit.

what it quarter. above, slightly just So was last

nothing build we inventory too inventory significant. the million. side, about then, And $X.X So, build did on

contribution So that But that change you margin. margins kind what to of and still, about be would that may impact the and on the think kind a in that of less that's about gross do one than or right would million about even what and around point month, have. $X

us great and got excited. the we up. reduce and profitability the prices margin, start that it's Mike and go really And I than gets more of starting those to initiatives, one thing on breakeven, that realized really the to how as initiatives are think traction to initiatives costs, up I in think show on some volumes surprised to we've mentioned, anything and the reduce kind is is increase that what

and that building look and expanding further. margins continuing momentum we that forward, As

Mike Shor

his that's Let in of trough by on one in which customers more touched We've Dan the spending been our this it add projects, to me and just thing in industry. script. special

projects. lot money some there's start that, with of So of these left to been a not

So in we're sequentially year-on-year. down We're special projects. down even

back, to offers begins to that the potential the as far as continuing improve as also future come us performance company. of So that

Michael Leshock

of Got maybe what terms back? cost are going the side it. to portion downturn you versus And And during much you then structural do Helpful. in pressures? how of what expect on the forward nature you seen in of might have come the the cost took out business, inflationary or see

Mike Shor

on portion the during of we you our pandemic side, a significant look at workforce. took people the When out

of thing. We're of maintenance our we think point, line XX% I our production workforce was and side our been this has drag fixed workforce called our of it obviously variable back. best variable And workforce, feet going at majority the to can. as this overwhelming

unfortunately, competencies fit it. On about that back, positions, cautious remove the be to spent by And those us. to core very are are people and to most and salary jobs hiring for sense side want doing the we but make we what reinforce money we bringing in continue we're to, trying our

momentum cost enhance improve variable And to I the to on a our in and improve customers. side deal pandemic. manufacture. think momentum we going for continuing our on way we to to processes we to cost yields, are We've gain our done had the great great the make products the

ours don't see going an But your as cost projects. see those when much we gone. continue has going get reduction of as higher goes volume, additional as volume You And we're impact forward. on as work low we to to

Michael Leshock

maintenance zero deferring? basically CapEx now, level million, base million CapEx any meaningful there's running you Should in there we your $X was right $XX below a the XXXX, you're if kind of quarter. in to million be uptick might we roughly. it, $X if maintenance call then expect maintenance in And at And

Dan Maudlin

no I learn career, I it from this as found deferring already, you What and you're you we capital, going We're to Yes. never maintenance. and spend. my with is as much find spend think should entire

not talk. going carryover. start approaching spend being have to I for than because to delay it don't There's years, million, at three, going like going We're occasional to So over, always to or the next and had an and four we we're $X we more but there. plus actually start approaching budgeting always actually here expect to minus. depreciation, there's

van wagon intentional timing that back down. an and of was That's the projects. get we'll pull not on So capital just

Michael Leshock

helpful. Thanks, That’s it. Got guys.

Mike Shor

Thank you.

Dan Maudlin

you, Thank Mike.

Operator

Go Sidoti. [Operator Instructions] Hernandez from Marisa. Our next question ahead, from Marisa comes

Marisa Hernandez

everybody. and you, thank Hello, morning good

Mike Shor

Good morning.

Marisa Hernandez

morning. Good

as with second segments. the year. the have both same in reported quarter on to there's aerospace ASP in in half the efforts time, time, this So in the this there's at chemicals takes that And number resources put calendar you recovery seems other the place. you cost-saving you the that mix more aerospace to for the moving but pieces same It gross margin having segment. of of outlook here and wondering you're a me the of At decline the can if and for comment

So context of could those that put be if in you for all great. would me

Mike Shor

to. we'd Sure, love

I've First, the our to working because an entire significantly. No we've business team start up with years got for efforts have margin three our to this a been on that on improve got with driving plus. We're team's gross focus secret. thrilled fundamentally

goal has far the our industry Our in been best be gross of the as as margin. slice to

price before the the then but direct on to for Marisa, is it's to We volume love not application a a hold about typically the by future encouraged in in best-in-class to back will contracts to the we quarter when beginning the way, and and will comes We're on really product. just and the which, back, us great across comes gross on on past And the drive think that million our as when our is $X net hit improvement. transactional that volume We What after the charge, encouraged great just comes innovation, about the pandemic gross back. highest just of aerospace, the can alloy back Dan our said charge. we're starting incurred eliminate hit XX%. that that. that. focused, I'm impact a step still impact it, point and We follow as as really we've And related I'm we XX% orders what sales significant X% marginal margin. aero margin can margin have because prices help and that said, what to But you working, of significantly take XX.X%. We board, service is cost technical reduction, general, business, raised just have increase direct about, before we see volume,

help We've help an alloys will -- mix. got going. our of so or those that And pipeline enormous in as get number we that and and products our we will alloys applications have

And As yield a focus poised to relentless I general, have variable mentioned, come cost reductions. are special we back. projects on then in and

So, continue me sure margin. I Dan will not. give have confidence high which to make I number, at we while stares tell grow don't a I our will can you that to that we gross

answer. long the for Sorry

Dan Maudlin

mention, to isn't ASP up selling going price just brought reflecting also what means. you average down. that's the by price, going really, And had mix. decreases any Just It's

selling orders, Mike earlier, was then mix not calendar we average should in this that optimal only goes with mix the year later the recovering see to looked aerospace help And see this As XXXX. aerospace. we us That referenced far and future quarter without and and go. we'll with prices where as goes as

Marisa Hernandez

a yet. aerospace? That’s expecting side, helpful. not here or tracked And are the that volumes in But of mix not have the in you for we increase any looking you're improvement huge already I understand the yet? September mix quarter on in

Mike Shor

beginning really customers quarter-on-quarter. the talk improvement later some quarter, expecting to we're to our begin our little only this is manufacture go But why and see aerospace. see we orders, don't year in But calendar expect seen up force. about to we uptick past so come are let and in to orders. sequentially, obviously That's orders to -- we’ve till we beginning aerospace orders slight What And we're them. did in in revenue the get an then see full have once we those

Marisa Hernandez

more? squeeze Thank one you. I can And

Mike Shor

please. Yes,

Dan Maudlin

Absolutely.

Marisa Hernandez

you. Thank

need of utilization across position this do is that may And recovery? at to can yourself a what any, flavor if make your to for me So, vary sites. understand I time? rate give investment, you expected the you But what

Mike Shor

recovery, maintenance force. for positioning well the done we've to into are the As is, and as that process back workforces ourselves our production of we bringing one far number thing full

keeping about believe So a back what of response we very we And in and our low shorter lead we lead competitive come And understanding we step of as to place supermarket have. we're for advantages what and we've the price competitive we that And be is shorter are. grades. flexibility then, talking advantages quick. for highlighted focused get. orders our what put doing important the is speed. out we a and lead keep taking is times, high-volume for on year more our the I And can major the one that. is over times, time times this what frank, now And the us And our more the this,

people the and what making from are now sure they're that perspective do come making they to we focused things positioning understand bringing to need back, our safety So, back. sure to our a me, are, trained, we on inventory

Dan Maudlin

And I you in for a bit amount increase capacities investments years if certain recovery, of to capital we significant talk even back prior say, little spent areas. keep step would you the a about in mind, in and

So we record capacities have beyond volume what And headroom believe to capacity made beyond was XXXX, where the a we have had were. aerospace. we additional in us year I we significant increase investments that with for in previously.

where So, to before. grow be needing beyond and the we're our were we'll to the not topline invest levels we future, depreciation in above able significant

Marisa Hernandez

you. Thank

Dan Maudlin

you. for the Thank Thanks questions.

Operator

management. I appears we to have would further over now [Operator it to at like Instructions] questions no And it this turn time.

Mike Shor

again you Okay. time Thank you look company. Thanks, weekend. you Have good of forward Kat. thank We interest support and today, for quarter. updating our your and to for all your next a

Operator

you. Thank We for you participation. This conference. thank conclude does your today's

have this may time your day. wonderful a You at and disconnect lines

Haynes International (HAYN) 1 Aug 212021 Q3 Earnings call transcript